TAP rescue plan received by Brussels

 In Aviation, Companies, News

The European Commission received the restructuring plan for Portuguese airline TAP yesterday paving the way for a €1.2Bn cash lifeline from the government.

The document outlines drastic salary cuts, mass redundancies, a downsizing of the company’s mostly rented aircraft stock, and closing one-quarter of its routes.
The Government will later, probably from early next year, begin negotiating with Brussels and will not put the airline’s future to a vote in the Portuguese parliament.
Unions have already said that the current restructuring plan will destroy the airline’s economic viability and competitiveness, while the estimated €1.2Bn cash injection needed to keep the airline off the ground is not enough.
Ironically in 2019, the year before the pandemic began, TAP carried a record number of passengers to Europe, the United States, Canada, Brazil, Angola and Mozambique – 17 million.
Nevertheless, even before the pandemic, and despite opening up many new routes, the airline recorded a debt of €118 million in 2018 and €106 million in 2019.
On 10 June, the European Commission approved a €1.2Bn cash injection by the Portuguese Government into TAP. This money, which will run out by the end of the year, simply provided for TAP’s immediate financial necessities.
At that time TAP was given either 6 months to return the money (never a realistic possibility), or set out a restructuring plan that would secure the airline’s long term viability in return for the lifeline.
The final document – that was drawn up by both TAP and the Government with the advice of the consultants BCG – has not been made public, but from what unions and parliamentary MPs know, TAP will become a slimline airline that will still require taxpayers’ money to remain in the air.
Either way, TAP will require fresh funding over the next four years, expected to be around €1.8Bn which could come from public money or with State-backed loans.
This amount would be added to the €1.2Bn funds from this year, meaning the total would amount to €3Bn.
These funds would be on the condition that TAP begins to cut fixed costs with staff and aircraft. As a result of non-renewed contracts, amicable redundancy agreements, outright redundancies and early retirements, the airline will have shed around 2,000 jobs making savings of up to €1.4Bn over five years.
In fact, redundancies had already begun before the pandemic which resulted in a large part of staff being laid off. TAP did not renew 729 contracts which ended between the start of the year and the end of September. At the end of September the airline had 8,510 employees on its books.
And for those who stay, their situation will change substantially, with salary reductions across-the-board of between 20% and 25%, although those on the lowest salaries of €700 to €800 per month will be the most protected. Whether the top brass will take a haircut has not been made clear.